Top-Paid Group and 410(b)(6)(C)

Do we have until the end of the 410b6c grace period to align the HCE definition?

Austin: HELP!  What does the question mean?  "Align HCE definition"?

Larry.

One Plan uses "top-paid-group" and the other does not.

The coverage grace period applies just to coverage.  It does not apply to the Plan's definition of HCE's.  Perhaps you might suggest that it is implied, but that is different then it being documented somewhere.  I stipulate that it is implied, but I am hoping to find something on-point in terms of an ASPPA Q&A and the like.

Now I understand what you are asking (better to explain things completely the first time).  I will see what I can come up with but at this time of the year, it might not be today! :-)

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better to explain things completely the first time

Gee golly willickers, that's sound advice.  Thanks Pa.

2 minutes ago, austin3515 said:

Gee golly willickers, that's sound advice.  Thanks Pa.

Yeah, this is not the time of year to have to play 20 questions! :-)

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Yeah, this is not the time of year to have to play 20 questions! :-)

I've never been one to let a snarky comment go unchallenged, so despite my overflowing in box...

You make it sound like I'm a client calling you for a 50 life cash balance plan for 2018.  These are message boards, man, don't reply if you don't have time. 

52 minutes ago, austin3515 said:

I've never been one to let a snarky comment go unchallenged, so despite my overflowing in box...

You make it sound like I'm a client calling you for a 50 life cash balance plan for 2018.  These are message boards, man, don't reply if you don't have time. 

Maybe your philosophy, not mine.  Every question is important or shouldn't be asked (there are some posts that shouldn't be asked and I do not reply to them).  If you can look at your original question and then look at your second posting (after I noted I had no idea what your first question meant) and think the first one was a reasonable posting to ask others to consider, then nothing I will say will have an impact.  I say this not just to you, but to everyone: flesh out your posted questions and provide more information than you think may be needed.  TMI is never the case here. FWIW.

Oh it's important and if you can answer it I'll say thank you very much :)

23 hours ago, austin3515 said:

One Plan uses "top-paid-group" and the other does not.

The coverage grace period applies just to coverage.  It does not apply to the Plan's definition of HCE's.  Perhaps you might suggest that it is implied, but that is different then it being documented somewhere.  I stipulate that it is implied, but I am hoping to find something on-point in terms of an ASPPA Q&A and the like.

 

I think your statement of what the grace period applies to may not be accurate.

I think the rules are basically providing that if you meet the requirements for treating the plans separately during the grace period for coverage, you basically get to treat them as separate plans altogether for other purposes as well. Therefore, until the grace period is over, it doesn't matter that they are utilizing different provisions for determining HCEs.

Here's stuff from the EOB that might be helpful.  I recognize it is not directly on point, but I think my read of it is most likely. Frankly, any other reading wouldn't make sense. For example, we meet coverage but still have to meet non-discrimination taking into account all the participants?  We know that's not true (right?).

Part E., Transition period for certain acquisitions or dispositions (IRC §410(b)(6)(C))

As illustrated in Part D of this Section VIII, a controlled group situation can affect coverage testing. If a greater percentage of the NHCs in the example in Part D.3.a. were employees of subsidiary Y, the X plan may have failed coverage. Due to mergers, acquisitions or spin-offs of companies, the make-up of a controlled group or affiliated service group may change. Also, when there is an asset acquisition, employees may experience a change of employer due to the business transaction (e.g., company purchases a division of another company - see 2. below). Under IRC §410(b)(6)(C), if a company (i.e., a corporation, a partnership, an LLC, a sole proprietorship, or a non-profit organization) becomes, or ceases to be, a member of a related group described in IRC §414(b), (c), (m) or (o), coverage is deemed to be satisfied during a transition period by any plan maintained by an employer involved in the company-level transaction, if: (1) the plan seeking relief met the coverage requirements under IRC §410(b) immediately before the change in employer (or related group) (see 7. below), and (2) the coverage under such plan is not significantly changed during the transition period (see 3. below), other than by reason of the change in members of a group or the change of employer due to the company-level transaction, or such plan meets such other requirements as the Treasury may prescribe by regulation. Also, as discussed in 2. below, similar treatment is provided with respect to plans in which other business transactions (e.g., acquisition of assets) result in the change of employer for one or more individuals. The transition period under IRC §410(b)(6)(C) begins on the date of the change and ends on the last day of the next plan year beginning after the change (subject to an earlier ending date in the event of certain significant changes in the coverage of the plan, as discussed in 3. below).